Clay Holderman, CEO of UnityPoint Health, and Dale Maxwell, CEO of Presbyterian Healthcare Services, had been talking for a while about seeking partnerships with other health systems when it finally dawned on them they should be talking to each other about a possible merger between their two organizations.
It didn't hurt that the two enjoyed a close professional relationship given Mr. Holderman's past role as COO of Albuquerque, N.M.-based Presbyterian, a position he held for four years before taking on the CEO role at West Des Moines, Iowa-based UnityPoint in January 2021.
Now the two systems are seeking a quick resolution to their possible $11 billion merger after revealing the potential future partnership March 2.
"The fact that Dale and I have a trusted relationship, the discussions between our boards, these have been a huge facilitator of speed — trust has been a great accelerator of the process," Mr. Holderman told Becker's in an interview involving both he and Mr. Maxwell.
The reality of it being a cross-market merger with services in New Mexico, Iowa, Illinois and Wisconsin is a major benefit of the tie-up as it will allow both entities to stick to their own trusted brands in their long-established individual communities, Mr. Holderman said. It won't hurt, either, that it could keep federal regulators such as the Federal Trade Commission more at bay.
"To not have overlapping markets plays well, but we will be happy to work with both state regulators and the FTC to continue to move forward," Mr. Maxwell said.
Different strengths, same values
The different strengths of the two systems is a key element of the merger, said Mr. Holderman, who estimated a combined entity would total about $11 billion in annual revenue. While Presbyterian, for example, has a robust health insurance arm, UnityPoint has a more comprehensive hospital ecosystem.
"We are united in scale, capability, culture and a commitment to rural care," he said.
Additional benefits to any partnership will be more investment in clinical excellence, digital innovation, workforce development and value-based care, according to a March 2 statement. In addition, there will be the opportunity to cut administrative costs.
"We will bring together and eliminate duplicative services and re-deploy that capital back to the front-line workers," Mr. Maxwell said.
It is too early to discuss if such cost-cutting could result in possible back office job cuts, but front-line workers will see no changes to their day-to-day operations, Mr. Maxwell said.
"It is very easy to go to our hospital caregivers, our insurance people and our physicians and tell them there will be no disruption from what they are working on today," he said.
Neither is it the time to discuss how any eventual leadership structure might look in a combined entity nor what name such a system might have, Mr. Maxwell said.
What is important is that the partnership gives rise to a real possibility of establishing a new model for two independent health systems that have succeeded independently in their respective markets but that, like so many other systems, are facing unprecedented financial challenges.
"There were so many fundamental changes we saw in 2022, such a structural change across the entire health sector, and we knew we had to do something different and find a more sustainable path forward," Mr. Maxwell said. "We can't solve these structural problems with old solutions."